A new report commissioned by the European Commission and the European Investment Bank (EIB) highlights growing climate-related risks to Europe’s agriculture sector and calls for greater investment in catastrophe bonds and other financial instruments to help safeguard food security.
The report marks the first consistent EU-wide financial assessment of climate change’s impact on current and future crop yields.
According to the study, extreme weather events are already costing the EU agriculture sector an estimated €28 billion annually. By 2050, average yearly losses could rise to over €40 billion, with most of these losses remaining uninsured.
The report also identifies a catastrophe risk exposure of €60 billion related to drought alone – an amount projected to reach €90 billion by mid-century. These trends pose potential threats to food prices, supply chains, and rural economies across Europe.
Howden Re contributed to the report’s analysis by compiling production data from all 27 EU Member States and assessing the effects of rising temperatures on agricultural output. The study also evaluated the insurance structures currently in place across the bloc, revealing a substantial protection gap.
Farmers are absorbing 70 to 80% of weather-related losses, with governments often stepping in to provide emergency funding not accounted for in annual budgets.
Projections suggest that, without enhanced climate action, average crop losses could increase by up to 66% by 2050, potentially reaching €46 billion annually. In catastrophic years, losses in countries like Spain and Italy alone could escalate to €20 billion.
Despite the severity of these impacts, insurance coverage remains limited. Currently, only 20 to 30% of climate-related agricultural losses are insured, leaving a significant protection gap.
Howden Re’s findings support several policy recommendations, including scaling up climate adaptation measures and expanding the use of reinsurance, catastrophe bonds, and mutual risk pools. These instruments, the report suggests, could help spread risk across private and public sectors and reduce the reliance on state-backed relief.
Massimo Reina (pictured above), CEO of Howden Re International, said there is growing interest from reinsurers and capital markets in backing EU agricultural resilience.
“Innovative financial mechanisms like catastrophe bonds and risk pooling can provide farmers, government, and the EU with the tools they need to attract significant private sector capital to share in the risks and help secure our food systems,” Reina said.
The report’s key findings also show that climate risk currently reduces EU crop yields by an average of 6.4% annually, with this figure exceeding 10% in severe years. By 2050, catastrophic crop and livestock losses could total more than €90 billion in a single year – a 40% increase driven by climate-related events.
Drought is responsible for over half of agricultural losses across the EU, with other risks including hail, frost, and excessive precipitation.
National-level variations in risk are also pronounced. Catastrophic loss projections for Spain and Italy could exceed €20 billion annually in extreme years. Smaller economies in Central and Southeastern Europe face potential agricultural losses equivalent to more than 3% of GDP during such events.
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